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Questions and Answers
What is the primary goal of Activity-Based Management?
What is the purpose of identifying and listing a company's significant business activities and their cost drivers?
What is the result of using Activity-Based Costing and value-chain analysis?
What is the main difference between Operational ABM and Strategic ABM?
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What is the primary goal of Cost-Driven ABM?
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What is the primary goal of Value-Driven ABM?
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What is one of the advantages of Activity-Based Management?
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What is a disadvantage of Activity-Based Management?
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What is the relationship between Activity-Based Costing and Value-Chain Analysis?
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What is the ultimate goal of using Activity-Based Management in an organization?
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Study Notes
What is Activity-Based Management?
- Activity-Based Management (ABM) analyzes the cost of an activity in relation to the value added by the activity to achieve operational and/or strategic improvement.
How it Works?
- Identification involves finding and listing a company's significant business activities and their cost drivers.
- Evaluation and Value-Chain Analysis quantify the value generated by each activity to compare it to the cost and evaluate the activity.
Steps in ABM
- Identification and Analysis: find and list significant business activities and their cost drivers.
- Evaluation and Value-Chain Analysis: quantify the value generated by each activity to compare it to the cost.
- Identifying Opportunities to Improve: use analyzed information to identify and implement process improvements.
Types of ABM
Operational ABM
- Studies the cost of each activity to increase operational efficiency by enhancing value-generating activities and eliminating unnecessary costs and non-value-generating activities.
Strategic ABM
- Analyzes the profitability of an activity, such as launching a new product or acquiring a new customer.
Types of ABM (continued)
- Cost-Driven ABM: aims to reduce costs without compromising product or service quality.
- Value-Driven ABM: aims to increase customer satisfaction and loyalty, leading to increased sales and profits.
Advantages of ABM
- Improves customer experience.
- Increases profitability.
- Provides crucial financial information for future forecasting.
Disadvantages of ABM
- Time-Consuming.
- Costly.
- Complex.
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Description
Learn about Activity-Based Management, a method that analyzes the cost of an activity in relation to its value added, aiming for operational and strategic improvement.
